Supreme Court Roe Ruling Transforms Abortion-Rights

You can also listen to our radio show at two pm Eastern Time on Bloomberg Radio, or watch us on YouTube search Bloomberg Global News. Well, we're continuing our coverage of the Supreme Court's decision to overturn Roe v. Wade, wiping out the constitutional right to abortion. Earlier in the afternoon, President Joe Biden weighed in. Check out what he had to say. It's a realization of an extreme ideology and

a tragic error by the Supreme Court. In my view, the Court has done what has never done before, expressly takeaway a constantial right. It is so fundamental, so many Americans that have already been recognized. That was President Joe Biden with his initial response at least to the Roe v. Wade ruling today or the ruling overturning Roe v. Wade joining us our Bloomberg in Actor Broker Studios, Jim Grasso,

Bloomberg News legal analyst. She and I spent most of the morning together today talking about this story, and I know since that time she has literally been boring over

uh this uh statement and the case. What's new? Well what I this morning we were talking about, you know, the repercussions of this decision and what it might mean for contraception and gain marriage and all these decisions based on privacy, and the dissent predicted that quote, no one should be confident that this majority is done with its work.

And Justice Thomas in his concurrence, he actually said we should reconsider all of the Court's substantive due process precedents, including Griswold that's privacy lawrence, that's marriage, and oh Berger Fell, which is same sex marriage. So he's inviting people to challenge that. So people who say let's not panic read that opinion. So you're saying, you were saying that Justice Clarence Thomas in the text today is essentially inviting cases to overturn gay marriage to overturn the right to be

in the same sex relationship. Yes, and he has succeeded. He has been saying that people should challenge the Second Amendment, that the Second Amendment was uh not, you know, was a secondary people considered a secondary constitutional right. It wasn't like on the same level as the First Amendment, etcetera. And he and he won with that one yesterday. So you know, I mean, so anything in the there's really nothing surprising and how the vote went down, is that right?

I mean, there's no, there's nothing surprising because we got that draft and do we know anything more about that where that may have No, we don't know anything about that. And that's sort of what's puzzling to me, is that. Now my opinion, this is just my opinion. No basis in fact for this. But we know it is true that the Justice Chief Justice decided that the Marshal the Supreme Court Martial would do the investigation instead of, for example, the FBI. That lets them have control over what the

marshal finds. They may know at this point who leaked that, they may not tell us. Why does that matter so much? Well, it matters to the court because after that leak. Justice Clarence Thomas said something to the effect of, I'm looking over my shoulder now there's has destroyed the confidence and trust on the Court, and it's something that they want

to find out so that doesn't happen again. It's interesting that you mentioned the confidence and trust of the Court because Susan Collins, Senator Susan Collins, uh, you know, voted to confirm uh, Kavanaugh and Gore such and earlier today she put out a statement that said, this decision is inconsistent with what Justices Gore such in Kavanaugh said in their testimony and their meetings with me, where they both were insistent on the importance of supporting longstanding precedents that

the country has relied upon. Well, it's not only inconsistent with what they told her. Also, Joe Manchin said something similar Senator Joe Mansion. But all the Supreme Court conservative Supreme Court justices in their testimony, because I've gone back, had said that row is an established right, even Justice Alito, so he said that then, and Kavanaugh was really emphatic

about it. It's an established right, It's been established. So, I mean, did their minds change when they were these arguments for your oral arguments, or would it be fair to say that they perhaps weren't necessarily being truthful in their testimony. M I don't want to say they weren't being truthful in their testimony. Perhaps the way they felt, the way they worded it. I mean, I have to say that Amy Coney Barrett, just as Amy Coney Bartt was,

was more forthcoming in her testimony. She said it's not a super right whatever. She called it a super precedent. So she said it's a precedent, but not a super precedent. She said that only super precedents can be overturned. It's not a thing. It wasn't wasn't a thing at Harvard. I don't know if maybe where she goes she went to Notre Dame. So all right, uh Noah Feldenberg opinion comp So I'm gonna call out and refer to this note probably a couple of times today out with a

column today, and the title just grabbed me. The headline abortion ruling is suicidal for the Supreme Court. That strong language there, it's strong language. But we have a Supreme Court that the super majority on the Court now is out of step with the majority of Americans, because in every single time kind of goes to how you interpret the Constitution. Is it just a concrete thing that doesn't change, or does it expand and contract with society and evolved

and things like that. When Justice um Scalia was alive, he and Justice Brier would do these um sort of dueling constitution lectures, and Justice Scalia would talk about originalism and textualism, and Justice Brier would talk about the living Constitution. The problem now is you have six people who believe in textualism and some who are real adherence to textualism. So that's how we got, I believe, to these two decisions, which yesterday they went back to the seventeen hundreds and

eighteen hundreds. Today's decision they went back to the fifteen hundred sixteen hundred. I mean, it's it's it's starring for someone to think that, you know, I don't. I think the founders were very wise, But how could the founders anticipate the kind of world we have today? I mean, look with the Founders included in the Constitution about slavery, and then you have to look no further than the fourteenth Amendment to understand that that document was something that

has been living and changing. That's why this decision today is so shaking. It so it's it's sort of put you off balance because you know what about precedent? Now, does that mean that there's no They're not going to rely on precedent anymore. It's very scary in a way. Well, we'll certainly keep turning to you. That's June Grasso. She's Bloomberg News Legal analyst, also the host of Bloomberg Law weeknights at ten pm Wall Street Time on the Bloomberg

Radio with us in the Bloomberg Interactive Broker's Studio. You're listening to Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes. Tim Stinovic on Bloomberg Radio. Well, he's a Nobel Laureate, a columnist for The New York Times, and the Distinguished Professor of Economics at the City University of New York Graduate Center. Also the author or editor of more than two dozen books, including the Return of Depression,

Economics and Arguing with Zombies, among others. Paul Krugman, Welcome back to Bloomberg Business Week Radio. It's it's great to have you with us. How are you I I'm good. How are you. We're doing okay? I want to start with the Supreme Court decision. I saw you were tweeting about it. We learned today, of course, that the Supreme Court overturned at Roe v. Wade, wiping out the constitutional

right to an abortion. Now we've already seen companies like JP Morgan and others come out today and say that they're gonna pay for employees to travel to other states if needed to obtain a legal abortion. I'm wondering about the economic effects of this. Do you see any ripple effect in the U s economy as a result of this decision? Well, it probably not in terms of the macro numbers. I think there may be some regional aspects.

I mean it too. One of the big driving forces of change in the US economy over the past couple of decades has been this um kind of unequalizing as the knowledge economy has wanted to gravitate towards big cities

with highly educated populations. Um. And now there's gonna be additional factor, which is um if companies want the kind of workers that they can get in those locations, are they going to want to locate in the states that are going to be have really overregressive social policies, the kinds of social policies that that they're the workers they

want really don't like. So you really have to think, you know, how, how does Texas or Florida fair in this kind of competition for business and in this new legal environment. Florida seems to be doing pretty well. We saw citadel Um move down there and lots of other companies. Means to see how that plays out of our time. So Paul, just wondering here. I think you know, as Tim and I speak to various fund managers and uh uh C suite folks, one of the questions obviously today

is this Federal Reserve. They have a balancing act. They're very tough balancing act to reign in inflation while not going too far and pushing this economy into recession. How do you think that plays out well? It's I mean, the fundamental problem is not does not actually look to me to be all that hard. It's a weird thing to say, but it's pretty clear that the US economy got overheated UH fiscal monetary policy. UM, it was misjudged.

I was among the people who misjudged it. And the u s economy got overheated, and so we have most of the inflation we're seeing as special factors that will go away. Russia won't evade Ukraine every every month, but there's a good, solid extra maybe two points of inflation.

Excess inflation that results from an overheated economy. Cooling off that overheating is not fundamentally a hard thing to do, and and needn't be all that hard, needn't even involve a recession, just a little bit of a an uptick in the unemployment rate. The problem is precision. I mean, the Fed is not sure however heated the economy is. It doesn't know exactly how much of our of a

rate rise is needed to do this. So the chance of of you know, overdoing it, of slamming that breaks a little too hard and causing a bit of a skid is deathly there. So it's a reasonable chance that will have something that will be formally a recession. But the chance of a really you know, sort of early eighties type grueling and anti inflation flight, uh that that doesn't look serious. How deep of a recession could we have,

How long have the recession? How high could unemployment go it's well, how high it could go could be over I mean, it probably has to rise over four. And it's not hard to come up with a story in which the FED bobbles the thing badly enough that it briefly goes above five. But briefly. There's nothing at all in there to suggest that we need UM an unemployment rate that's over five for any extended period of time, and the Fed will of course correct if it does

look like we're heading in that direction. So just to that point, Paul Larry Sumners is out with an idea of five years five percent unemployment needed to bring down cp I. That doesn't necessarily seem to hold water to you.

That looks to me like Larry is for reasons, I do not understand thinking that we need something that's like a UM sort of a half vocre that we need a massive period of excess unemployment for an extended period of time to crush inflationary expectations, so which is what we had in the early eighties, except everything every indicator I look as says that inflationary expectations are actually pretty muted.

When you consider the price of gas, the fact that surveys are showing that people expect only three percent inflation over the next five years um that they break even rate, and the bond market is is well under three percent. Now, I just don't understand where the idea that we need to do something like a volcre in the economy of twenty two is coming from. But what about the idea that so much of this inflation is outside of the Fed's control, and so much is due to demand to

supply constraints. Excuse me, and the FED, you know, has famously blunt tools. How can the FED get this under control? If if they can't drill for oil, if they can't refine oil, and if they can't build houses. Know what the FED does? Is it? It? It? Uh you know, give me the monetary policy to deal with the things I can and to accept the things I can't. The Montreal J. Powell, it's a it's a these these things

will pass. That's the whole point. I mean, the big misjudgment that many of us made was to focus only on these things and think that they were transitory and uh um and would pass fairly quickly. But they will pass. And so what the FED needs to do is to get some kind of underlying inflation rate back to around his two percent range, and then the other stuff will eventually.

I mean, gas prices are already coming down. So think about the the things that that really are the appropriate targets of monetary policy on a global perspective, Paul, I mean, you know a lot of folks have said to the US federal reserves behind the curve, but I look across the pond and I see the Bank of England. Okay, twenty five basis points. We heard from Christine Lookard at the ECB that they're thinking about raising interest rates next meeting.

How do you think about the the European response and meeting from the Bank of Japan as well, relative of where the were The FED is, well, what's the funny thing about terrey policy? Is it? Um? It's it Terrey policy starts having an effect before it actually happens, right the uh So, we look at the actual amount by which the FED has raised rates, and it isn't that much yet. But if you look at the rates don't matter for the economy, mortgage rates, corporate bond grades, they're

way way up. So the anticipation of future FED rate hikes has already done a lot and the peculiar thing is that although the ECB hasn't raised rates as much as the FED um the those indicators of what people are expecting are every bit as big, if anything bigger, in Europe than they are right now. De fact, the e c B is is pursuing a tighter monetary policy than the FED is, which seems to me to be crazy. I mean, the the underlying inflation rate in Europe is

probably substantially lower than it is here. They didn't have an American rescue plan. They don't have the rapid wage increases that we've been seeing. So I'm my concern is not that the e CP is behind the curve. My concern is actually that the u CP is way ahead of the curve, and that that they're going to do what historically the e CP has tended to do, which is to over contract. Interesting, all right, so you mentioned kind of wages. That's kinda where I wanted to go.

The The labor market has been just spectacular. We've got, you know, more job openings and we know what to do with here. Are you concerned? Do you think we will in fact see meaningful wage inflation because the five percent? Uh, you know, we we see it's just not keeping up

with that headline number. Yeah. Well, the the numbers, i mean, wage rates now are are rising depends on We're having a lot of problems with adjusting because we have a changing composition, the pandemic and all of that has really

screwed up with our ability to interpret the data. But I would have said that we seem to be having wage growth in the fine ish percent range, which given productivity growth, is underlying inflation, and the probably full or a bit less range, which is consistent with the other indicators we have. So basically and wage growth, if anything, seems to be slowing, even though we haven't yet had a uh significant rise. And unemployment, it looks as if

the wage numbers are are coming down a bit. So wages are not They're they're not They're not an additional problem. They're basically telling the same story as everything else is. I'll have some anecdotal evidence of inflation. Did you get a raise? The best hogies in the world are hog Haven from Princeton, New Jersey, and they actually did raise the prices on the hogies there. I was down there a couple of weeks ago, and they haven't raised I mean I don't think so. So they're making up for

some lost time. Paul Krug down in Printon, you're seeing some inflation down there. Oh yeah, well, I mean it looked lots of things. I mean it's uh um, I'm surprised actually give them the way that a lot of companies that behave, they didn't just make the hogies smaller, which would both be a way to conceal the price increase and probably be good for your health. Inflation, it's a real thing. I've actually noticed it happening with ice

cream containers I'm buying are smaller. Uh. Paul, I'm wondering about the peak federal funds rate. If you would give a prediction as to where you think it will end up? Yeah, I mean that this is that's that's that's a that's a mystical art. And um, even the people who do it well do it badly. Uh So you know, I'd say three d paces points. What do I know? It's and the truth there's nobody knows. J Powell doesn't know. We're we really are the fittest feeling its way forward

here as it should be. I mean, the at any time, any attempt to lock in a rigid path given the uncertainties about not just about the effects of policy, but even about where we are. I mean, the US economy is clearly overheated. How much overheated? I don't know. So No, I mean this is yeah, I uh, I mean I I don't have any reason to think that the No. I my guess is that the markets are probably overstating

how much the FED is going to raise rates. That it's probably um, we're probably going to be seeing just as inflation went up faster than people thought it would as the economy overheated, inflation probably coming down faster than people thought it would as the economy cools off. But I can't give you a number on that. Okay, Well, last question, just in the last thirty seconds that we have with you, what's the biggest economic risk that lies ahead for the U s economy? Oh? I mean right now?

I mean that's short term. Long term, there's always horrible things like climate change and more and all that, but short term it is I think the biggest risk is that the FED will overdo it, that it will slam on the brakes too hard. All right, There you have Paul Krugman, Noble Laureate economist New York Times columnist. He's Distinguished Professor of economics at the City University of New York Graduate Center. He's the author or editor of more

than two dozen books. Joining us via Zoom from Princeton, New Jersey, Paul Krugman. Really appreciate your time this afternoon. Thanks so much for joining us on Bloomberg Business Week. You're listening to Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. Our coverage of the Supreme courts overturning of Roevie Wade continues this afternoon.

We're very pleased right now to be joined by Sonya Sarrio, the president of the National Organization for Women in New York City. The National Organization for Women is the largest organization of feminist grassroots activists in the United States. Sonia joining us this afternoon from the city, Sonja, Good afternoon. UM.

I want to just you know this. I think this decision for a lot of people was anticipated because of the leak from May, but I'm wondering your reaction as soon as you saw just after ten clock Wall Street time, the Supreme Court's ruling. You know, I've been checking my phone over the last days, with each passing day being a little bit more nervous knowing that the decision was was imminent. Uh, And I have to say, it's still was shocking to see, and my reaction, um was certainly

one that was shared by many many people. I mean, my phone, UM has just been blowing up all day with people's just shock and and fear and disappointment over the turn of events here in this country for women, you know, a right that we have had for more than fifty years to fundamentally be able to make decisions about our lives, about our bodies. UM. And it's um,

it's it's moving forward. It is going to be a very very difficult situation for a lot of people, purely imminently as this change goes, it starts to take place. So that's kind of where I wanted to go, Sonya. How do you anticipate, uh, this practically unrolling over the upcoming days, weeks, and months. I know you and your organization and others have been you know, kind of thinking about this and probably planning for it to some degree. How do you think this is gonna play out? Well?

You know, we have we have Texas in Oklahoma to look at for what has happened over the last eight weeks or so there. Um. You know, some of the stories that we are hearing are are just um devastating. You know, we have the the states that remain legal that are in the vicinity of those states where there may have only been one clinic to begin with are

up to five and six weeks with waiting periods. So you can imagine for those women who are pregnant now and our look for care, it's uh, it's it's a panic, a panicked scramble to figure out what to do. And you know, there's one woman story that resonates so much with me to think about what so many women and

families are going through. This was a Texas woman who um had to drive to Virginia to get to a clinic because that was the soon as she could get an appointment, which she needed to get one soon she had to do. So what this meant for her family was her and her husband packed up their two little kids, drove to Virginia, had the appointment, and they had to get back in the car and drive back. Because this family, these parents had to get to their job in the morning.

That's the burden that the U. S. Government is putting on women and their families in our country now. And when you think about what women have been through over the last two years and what they're going through now, um baby formula shortages, childcare shortages, and outrageous prices for childcare. The she session losing their jobs at really high rates, inflation, gas at five more than five bucks a gallon UM. It's it's really really um a big problem for families.

It's go ahead, sonya. I I wonder from a medical perspective what this means for for people, For for women who are pregnant but then find themselves with pregnancy challenges. Perhaps their pregnancy was planned, but then they find that it's an ectopic pregnancy perhaps, or that there's no way that she will be able to carry the baby to term because of genetic mutations within the embryo. What is

what are those women to do? Well? I really appreciate you bringing that up because that it's such a significant point. You know, that's really when things become a very serious health care issues. And to talk about morality or uh ideology and what what people think about abortion in general really goes out the window when we're talking about people's health and life. Um, and you know, this has always been a problem. I mean, this has been a problem

for a very long time. The particularly for the later term abortions if they're if they're needed, very very few places do them. And it's a huge burden to women. So it's just going to compound that. It's absolutely going to compound that. And you know, also, let's keep it into perspective. We've lost Roby Wade. But the truth is that it's been death by a thousand cuts for number

of years every year. At the state level. Uh, there are so many restrictions put into place, and there have been there have been women who haven't had access too for any kind of reproductive health care of this sort um, anything that's that's convenient or within within their state. So what do you expect to develop here in the city of New York, in the state of New York. How do you think this will play out from uh? In

terms of response? Right, so, we are gonna we are certainly going to be seeing those women who have to get on a plane to come to New York City to have those uh, those terminations that are endangering their

their health. UM. And you know, one of the things that the National Organization for Women here is launching is a it's an escort service of sorts, a buddy system so that people who are coming we can we can connect people who are coming to the city for services with locals here who will help them navigate the city, help them make appointments, go to the appointment with them that they want. Whatever the volunteers UH are are comfortable doing. It may be even offering them a place to stay.

We certainly are asking people to UH donate at this point to the many funds that exist to help cover the cost for the for people that are going to need to travel. UM. And that's particularly important now because as we as we've talked about, it's a crunch time now for people who are pregnant with all the changes that have been happening. And there are clinics who have been have been shutting down their operations over the last couple of weeks because they have businesses that have to

that have to be shut down and they've started that process. UM. So it's a very uh, it's it's a dangerous time right now. UM. But we are going to be working to making sure that those those avenues for people to be able to get here that they need if they have to travel here or to the other. You know, there's only in the country, Sonia. We unfortunately have to leave it there, but we really appreciate you taking the time.

We know you're very busy today. Sonia Osorio is the president of the National Organization for Women in New York City. The National Organization for Women is the largest organization of feminist grassroots activists here in the United States. This is Bloomberg Business Way. This is Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio.

All right, Tim, let's stick with the crypto storyline. We were just talking about a story where hackers looted about a hundred million dollars from a so called cryptocurrency bridge, again exposing key vulnerability in that that is real money. But that's the trend. That's clearly the trend. Dannell Dixon, CEO and Executive director for Stellar Development Foundation, joins us on the phone from San Francisco and Stellar you know,

it's interesting. It is a nonprofit organization using blockchain technology. To unlock the world's economic potential by making money more fluid, markets more open, and people more empowered. Denil, thanks so much for joining us. Really appreciate it. I know you guys recently announced a partnership with money Graham tell us about that. Yeah, thanks so much for having me. It's a really awesome it's how we actually announced the launch

of it. So it's really focused on reaching those one point seven billion folks around the world that don't have access to the formal financial system, and it's really about giving these cash economies an opportunity to be able to

get into crypto. Uh. Think about it from the standpoint of we've said always all along that blockchain is about those folks out there who don't have access and yet to be able to get on and to purchase assets, you had to have a bank account or a credit card, but you don't need to anymore because you could walk

into a MoneyGram location with your cash. You can make sure that you you set this up in your digital wallet in advance, and then you can convert that cash into USBC on Stellar and then hold those assets or do whatever you want with them in your wallet. It's a and you can also do cash out so that you can take the assets that you hold, you can convert them uh into cash by doing the same thing in reverse and going to money grabbing and picking up

your cash. So it's a really transformational opportunity. And while payments and and getting access by access like this might not be the sexy part of crypto and the stuff that you guys were just talking about before, but this is what brings blockchain and crypto to the masses. So it's just so exciting for us to be able to

see this. Well, it is interesting you say that to know, because I do think a lot about the promise of crypto and the idea of this sort of stateless currents, in the idea of cross border transactions being able to happen seamlessly. I was reminded of trying to, you know, get eighty bucks for a concert years ago from my friend who lives in England, and it was just impossible for him. It was impossible for him to send me

the money. And at one point he was just like, you know what, next time I'm in the US, I'll give you eighty bucks. And I'm like, don't even worry about it, Matt, because you're one of my best friends and I don't even care, and it was a great show, but I do know. It brings me to my point about adoption, and Paul mentioned this most recent bridge attack

of a hundred million dollars. It comes after we've seen other vulnerability with the bridge and other vulnerabilities with crypto, but it also comes at a time when the value of crypto has just fallen so much, and I'm wondering what that does for mass adoption. If people say, you know what, I was into this, but now I'm going to stay away because I don't want to touch the stuff. It's too volnable. Well, first of all when it comes to payment, so when it comes to being able to

move your assets. We really really believe in stable coins, and this this relationship that we have with money gram when all these wallet partners out there can leverage his money Gram table coin Danelle. As Kati Grayfield said yesterday, stable coin is almost a dirty word these days in crypto because of what happened with the you know, algorithmic

stable coins recently. Well, I think that's an excellent point to bring up, because stable coins, coins that are called stable coins should live up to their names and they should be stable. When you think about USDC, for example, that's the Circle issued stable coin. It's backed one to one by FIAT and they hold those and they actually keep it so it's transparent for folks to be able to see it. That's crucially important. We support those stable

coins that are issued globally. There are more than thirty issued on Stellar with that area by their local FIAT in much the same way. That's what we think is really important for that. So I want to talk I mean the recent turmoil and the crypto markets. I just want to emphasize that blockchain technology serves a purpose. It's serving the unbanked, the underbanked populations that are cash based, and many of them don't have bank accounts, and these

two billion people depend on cash for their livelihoods. What we're focused on, and what we've always been focused on, is making this real for them. So six percent of the world's adults globally operate the informal economy in some capacity, and so if you think about giving them the opportunity to be able to hold their value in a way

that's secure, it's in their hands that they control. This is what you can do now when you walk into MoneyGram with your cash and put it into your whatever whilet you choose it's connected to this service, you can do that right now. Moneygram's offering this for zero fees for the first year, to be able to get folks on boarded, to get them used to the service, and

to be able to demonstrate the power of it. This is truly transformational and remarkable, and I think there's a lot of really interesting stuff going on in crypto bock chain, but this is a bread and butter, So as we get more and more, this goes more and more of a retail product, and the extent that it is adopted kind of raises a question regulation. Where do you think we are in the regulatory framework? Where do you think we're going? Is this an SEC type of issue or CFTC.

How do you think about it? Yeah, it's a fascinating question. They think domestically in the US, we're going to first see regulation around the issue that you just raised on stable coins. I think we'll see actually some stable coin legislation. We already see some bills being proposed that's going to give us some some clarifying uh language there that will make it so that financial institutions that are not thanks will be able to issue stable coins and do it

in a way that's valuable to the end consumer. And I think we see a lot of these administrative bodies right now out there really tackling these issues in different ways. And I'll just tell you what I think. I think the most important thing is that governments have always been super successful and really good at regulating money. They've done this from the very beginning, whether it was pay for money that we're used to today or goal So we already have all of these activities set out in all

these different regulatory bodies. They know how to regular rate the activity. Stop focusing on the technology layer, and focus on the activity because the truth of the matter is it's not that different, Dion, We're going to meet that. Tonel Dickson, CEO and executive director of the Stellar Development Foundation, joining us on the phone from San Francisco. You're listening to a Bloomberg Business Week Kim Stanevick and Paul Sweeney Live and the Bloomberg Interactive Broker Studio in New York.

This is Bloomberg. I'm roc journal, but you let me drive. Oh no, no, no no, no, please I'll do the revels. I want to drive. It's a good question. Drive. This is the drive to the clothes music on Bloomberg Radio. All right. I like nice round numbers as much as the next person. For your SMP five hundred up two point eight percent today is Charlie Poullet reported. Uh, this will be the first up week in about a month over a month here, So I'm not sure what to

make it happen. Maybe our next guest who does this for a living, he might know. David Deet's managing principal and senior portfolio strategist at Peapack Private Wealth Management, joins us on the phone from the bustling metropolis of Summit, New Jersey. David, what do you make it this week's trading? What do you make it today's trading? A little bit of a dead cat bounce? Or do we have the

makings of something here? Well, so that's the sixty four thousand dollar question, is just is this just an oversold bounce or could it have some legs here? Certainly there's a lot of positives. We started this year at about twenty two times earnings. We came into this week at just sixteen times earnings, and of course you just look at the numbers, we're having one of the worst first halves of the year for stock since about nineteen seventy and quite frankly, when you look at history, bad first

halves are typically followed by good second halves. The other the thing I like here is we're detecting some softening in the economic conditions, which could help with the market's worst bugaboo, that would be inflation. So for example, if you look at real estate, a lot of people are crying in their beer right now as layoffs are starting to mount, as those higher mortgage rates are starting to bite, and of course leading indicators like commodities are rolling back.

So for example, look at copper entered this week at a sixteenth month low. Sometimes people call a copper doctor Copper dr Copper because this uncanny ability to predict the economic uh fortunes ahead um And so that suggests weakening in the economy and some softening inflation, and then ultimately could help the third bugaboo, which is what the throw reserves can to do. And they're seeming to become increasingly sensitized to possible economic weakness. So perhaps higher interest rates

won't continue forever. Okay, so higher interest rates perhaps won't continue forever. And you know, I think we had a guest on last week. I forget who it was. I know Ari's gonna say the name as soon as I say this, who said that the average amount of time between a tightening and a loosening schedule is only eight months. So when the Fed stops tightening on average, we start

to see looser monetary policy eight months. Uh. I think it's still too early for us to talk about that, but I do wonder, David, how far you think the Fed will have to go in order to bring inflation under control? And then what will be the consequences of that? Well, you know, no one knows for sure, but remember the bond market has done a lot of the work for the Federal Reserve already. We started the year with that ten year at just one and a half percent UM.

It briefly got up to about three point four percent, more than a doubling. Is still well above three. And look at what corporations are using and relying on. For example, UM the most credit challenged borrowers the high yield market. The yields there are now trading between eight and nine and so that's got to slow the economy. We know it's slowing the real estate market. So between the market itself and of course a lot of jaw boning, you know, a lot of sturm and dragged by the Federal Reserve,

I think we've already started to slow the economy. So it could be a shorter period of time rather than a longer period of time for these rate hikes by the Fed. So again, I think a lot of folks, you know, look at this federal reservances and boy, they've got a tough balancing act, you know, trying to rein in inflation while not pushing the economy, uh into a recession, at least not a deep one. Do you think the Federal Reserve can in fact kind of thread that needle?

F you will, Well, you know they've admitted this one of the toughest jobs on the planet here is to create that soft landing. And I think the problem is, of course, they're key metrics that they're looking at to guide their policy is joblessness and inflation, and those are both lagging indicators, while monetary policy acts with anywhere from a six to twenty four month lag, right, So they're trying to predict the weather when they land the plane based on whether when the plane takes off, and so

it's not easy. I guess the good news about that, although history doesn't favor them being able to create the soft landing, the good news is they're talking about how difficult it is, and so perhaps they're gonna be a little bit more dubblish, a little bit more cautious in terms of those rate hikes, and with some softening in the economic metrics that we saw, for example even today, with the Purchasing Managers Index softing a little bit, they may have less rate hikes and that could help prevent

a hard landing. Anyway, what's the other data that we need to be looking at or what are you looking at for indicators that we are starting to see some softening happening. And certainly, you know, the inflation expectations from University of Michigan pulling back slightly from fourteen year highs was was welcome news to the market. But what else did we need to be looking at? Well, next week, all eyes are going to be on Thursday's personal consumption

expenditures inflation data. You know, that's the Federal Reserve preferred inflation gauge UM, and if that shows the inflation is continuing to worsen, I think we're going to see some volatility. If, on the other hand, we just see a little a little bit less inflation in the latest month versus the prior month, I think markets could cheer that news. And of course, from a stock industris point of view, all eyes are going to be on those earnings, those Q

two earnings. We're gonna get them in waves starting in mid July. We're gonna see whether stock analysts have been too bullish and and and how those companies meet those expectations. And of course we're gonna be listening carefully to the outlook. We know that things did cool up premendously in Q two. How bad was that and how is that going to affect what the Fed may do and what investors are gonna do. As a former equity analys IM glad you brought up earnings. They do matter, they do count, uh

and certainly your initial thoughts on evaluation here. One of the challenges, I think, and one of the concerns for analysts is you know margins are to what extent our margins under pressure given some of these inflationary trends that we see out there, is that kind of where you see the risk for earnings here not so much the top line that maybe those profit margins. Yeah, absolutely, I mean you put it in context, which is basically macro analysts see hi earnings in the second half and higher

earnings in two thousand three. That doesn't square too well

with just the overall our sessionary concerns. But then you point to where it could be the weak link, and that could easily be the margins, as you point out, because with these inflationary pressures pushing up the inputs for production and for services, and of course we know that wages are starting to go up, and so the question is if companies are not able to increase prices and past thus along, then you're gonna have that shrinking of

the margins. We do know that margins are close to all time hides when you look at history, so it wouldn't be surprising to see those diminishing a little bit, and of course that's going to weigh heavily on earnings. David, we only have thirty seconds left here, the sving its best day in more than a month. It's May four, two is the worst behind us. Yeah, for some sectors who possibly some of the some of the tech names

look pretty washed out here with the naztack down. What we're seeing from history is there's not one bottom, but there is this theories of bottoms. So some things I would point out is, for example, some of the retailers have really been washed out here. You look at a couple of like Best Buy five, but they've increased that dividen per year. Energy of course is pulled back dramatically, but they're expected to show some of the high earns growth going forward here. All right, David Deets, we love

it when you join us. Managing principal and senior portfolio strategist at Pepack Private Wealth Management. They've got ten point seven billion dollars in assets under management. Joining us from Beautiful Summit, New Jersey. Thanks for listening to Bloomberg Business Week. Download the podcast on iTunes, SoundCloud, or Bloomberg dot com, and you can also listen to our radio show at two pm Eastern on Bloomberg Radio or watch us on YouTube search Bloomberg Global News